Microsoft Surface puts the heat on PC makers

Microsoft Surface puts the heat on PC makers

Summary: Microsoft scored a huge publicity coup by unveiling its innovative Surface range of Windows 8 tablets at a "mystery" press conference in Hollywood yesterday. The event dominated Twitter and prompted thousands of blog posts, with saturation coverage at tech sites such as The Verge, most of it favourable.

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TOPICS: Tech Industry
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Microsoft scored a huge publicity coup by unveiling its innovative Surface range of Windows 8 tablets at a "mystery" press conference in Hollywood yesterday. The event dominated Twitter and prompted thousands of blog posts, with saturation coverage at tech sites such as The Verge, most of it favourable. Since Microsoft hadn't even hinted at what it might be announcing, this was a huge risk. If the journalists who'd paid to make the trip to Los Angeles at short notice had been disappointed, the backlash would have been fearsome.

However, the Surface announcement is also risky in a different way: it means Microsoft will be competing against its own partners, the OEMs (original equipment manufacturers) who license Windows and build hardware to run it. Competing against platform partners is rarely if ever a good move.

Microsoft is obviously aware of the problem. Chief executive Steve Ballmer said that its partners had been aware of what Microsoft was launching, and that the Surface was priming the pump for Windows 8 tablets -- and ultimately, of course, for Windows 8 smartphones.

But Microsoft will clearly have a price advantage if its Surface prices don't include the cost of the operating system and, in the RT version, Office 2013 for Students. These have cost Microsoft hundreds of millions of dollars to develop.

Microsoft declined to say how much its Surface tablets would cost. However, it said the RT version would be comparable to other ARM-based tablets, while the Windows 8 version, which has an Intel Core i5 (Ivy Bridge) processor, would cost something like an Ultrabook.

There are bound to be tensions over pricing. Microsoft will want to sell at a premium price, both to make money and to give its OEMs room to undercut it. On the other hand, Microsoft will also want to sell Windows RT tablets in large quantities, to bump-start the market. It might even make sense to sell them at cost, because Microsoft will make profits on apps, games, and media services such as Xbox Movies and Xbox Music. This is what Amazon did with its Kindle Fire tablet.

At the moment, my feeling is that Microsoft will be aggressive on price with the ARM versions, but will restrict availability. The news from the press conference was that Surface will only be available from Microsoft online and from select Microsoft stores, not in the mass market retail channels. That means there will probably be queues and waiting lists, and Surfaces will fetch premium prices on eBay, which won't do the brand any harm at all. That will still leave plenty of room for OEMs to sell tablets through their existing channels, especially if they have innovative designs.

OEMs are in a difficult position, because they have nowhere else to go. They can't use Apple's closed, proprietary iOS and Mac OS X operating systems without getting sued into oblivion, as Psystar was. (See Apple nukes Psystar.) They could try switching to Ubuntu Linux -- which is what Canonical hopes -- but they'd probably not last very long. Historically, it has proven almost impossible to sell Linux machines, and they're too expensive to support.

OEMs can, of course, use Google's Android (which is Linux-based) on tablets, as many of them already do. However, this is a smaller, tougher market, and Google is likely to compete against them with Google-branded products. Google's purchase of a hardware arm from Motorola makes it look even less partner-friendly than Microsoft, and it would be surprising if Google's larger partners hadn't already developed a back-up/exit strategy based on forking Android, as Amazon did.

Either way, Microsoft is never going to ship anything like the 350 to 375 million PCs that OEMs will sell in 2013, most of which are cheap laptops and desktops. Microsoft is only competing in tablets, which currently comprise a negligible proportion of Windows machines. It's not as though Microsoft is muscling in on a profitable existing market that the OEMs already own.

The Windows OEMs might not like what Microsoft is doing, but it's much better for those OEMs to have a vibrant Windows 8 tablet market than for the business to go to Apple.

Finally, of course, Microsoft has its own, very obvious, exit strategy. After it has done the pump-priming, it can simply license the Surface brand name and technology to any OEMs who want it. The net result would be a much stronger Windows ecosystem, not a weaker one.

@jackschofield

http://www.youtube.com/watch?v=jozTK-MqEXQ Microsoft Surface press conference video from The Verge

Topic: Tech Industry

Jack Schofield

About Jack Schofield

Jack Schofield spent the 1970s editing photography magazines before becoming editor of an early UK computer magazine, Practical Computing. In 1983, he started writing a weekly computer column for the Guardian, and joined the staff to launch the newspaper's weekly computer supplement in 1985. This section launched the Guardian’s first website and, in 2001, its first real blog. When the printed section was dropped after 25 years and a couple of reincarnations, he felt it was a time for a change....

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4 comments
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  • Microsoft is competing against Free Open Source.

    It's a dichotomy of sorts. Linux is free, Apple is very expensive and Microsoft is somewhere in the middle.

    The marketing of Microsoft depends on inertia to a point. OEM's provide the pre-installed convenience that customers have become very used to. Anti-virus and Software companies are also in the loop along with many small businesses writing applications and utilities. Not to mention the retail and repair organizations that provide in store and in home repair and support. This grouping has established a strong monopoly status for Microsoft and filled it's coffers through the years, allowing it to acquire many companies and become even larger.

    Not surprisingly, people have accepted infections and malware as a part of life. This has served a two-fold purpose. One, AV companies have thrived and Microsoft has, in effect, used AV companies as a free Quality Assurance and Security Group to provide data and recommendation on security vulnerabilities. This symbiotic relationship with AV companies has allowed Microsoft the freedom to write their OS and applications without rigorous attention to security design. Problems, after-the-fact, will be discovered and reported at a later time by the AV companies and documentation such as the Stuxnet report will detail the design of the malware or botnet. Critical Updates will be issued based on this "free" information. Given enough time, this arrangement produces an OS like XP. (Patched beyond belief).

    Symantec Stuxnet Report:
    http://www.symantec.com/content/en/us/enterprise/media/security_response/whitepapers/w32_stuxnet_dossier.pdf

    It's easy to understand how Open Source can provide exceptional security. Having the source code available to the public, in effect, publishes the blueprint for the safe and bank vault. It has to be secure in such a way that it's operation cannot be hidden and that there is no way to bypass it. My family has used Linux for over 10 years without anti-virus and have had no issues at all. I can order online and access financial and retirement accounts without fear of being hacked. The Linux Mint website (about LinuxMint) describes that anti-virus and anti-spyware programs are not necessary. Microsoft simply cannot provide this level of security.

    So, in order for Linux to compete, it has to be pre-installed, existing and new software has to be ported to it, Anti-virus companies are no longer necessary and have to be taken out of the picture. All of this has to be done with no advertising.

    Why Linux is not successful on the desktop:
    http://www.youtube.com/watch?v=iNnGMBMJKNM

    July 9 will be an important date for Microsoft. Microsoft and ZDNet have been trying to bury the damage TDL-4 and its relatives have done. If it's large enough of an issue, than present media outlets that Microsoft controls won't be enough to contain the damage.
    Joe.Smetona
    • Well today is July 10th

      and there is not a flood of media covering the massive damage TDL-4 that you speculated.

      Beyond that I will say one thing... There is no such thing as being completely safe. There is no operating system created that is beyond compromise and making claims as such is not being realistic.

      Linux mint mint is "safe", because it is a non-factor. There are not enough systems running Mint to generate enough interest from the darker sides of the internet.

      Apple used to love about how the Mac was "safe" from malware and apple users loved to poke fun at windows about vulnerabilities. Not so much anymore. Apple quietly removed those claims from their website and also doesn't detail what their security updates fix (or what users have been exposed to).

      The worst thing about the false sense of security is not having at least a minimum amount of defense or detection. Most users that feel they are safe will never know if they have been compromised, because they have nothing to actually secure, detect, remove or inform of a security failure.
      Emacho
  • Microsoft is competing against Free Open Source.

    It's a dichotomy of sorts. Linux is free, Apple is very expensive and Microsoft is somewhere in the middle.

    The marketing of Microsoft depends on inertia to a point. OEM's provide the pre-installed convenience that customers have become very used to. Anti-virus and Software companies are also in the loop along with many small businesses writing applications and utilities. Not to mention the retail and repair organizations that provide in store and in home repair and support. This grouping has established a strong monopoly status for Microsoft and filled it's coffers through the years, allowing it to acquire many companies and become even larger.

    Not surprisingly, people have accepted infections and malware as a part of life. This has served a two-fold purpose. One, AV companies have thrived and Microsoft has, in effect, used AV companies as a free Quality Assurance and Security Group to provide data and recommendation on security vulnerabilities. This symbiotic relationship with AV companies has allowed Microsoft the freedom to write their OS and applications without rigorous attention to security design. Problems, after-the-fact, will be discovered and reported at a later time by the AV companies and documentation such as the Stuxnet report will detail the design of the malware or botnet. Critical Updates will be issued based on this "free" information. Given enough time, this arrangement produces an OS like XP. (Patched beyond belief).

    Symantec Stuxnet Report:
    http://www.symantec.com/content/en/us/enterprise/media/security_response/whitepapers/w32_stuxnet_dossier.pdf

    It's easy to understand how Open Source can provide exceptional security. Having the source code available to the public, in effect, publishes the blueprint for the safe and bank vault. It has to be secure in such a way that it's operation cannot be hidden and that there is no way to bypass it. My family has used Linux for over 10 years without anti-virus and have had no issues at all. I can order online and access financial and retirement accounts without fear of being hacked. The Linux Mint website (about LinuxMint) describes that anti-virus and anti-spyware programs are not necessary. Microsoft simply cannot provide this level of security.

    So, in order for Linux to compete, it has to be pre-installed, existing and new software has to be ported to it, Anti-virus companies are no longer necessary and have to be taken out of the picture. All of this has to be done with no advertising.

    Why Linux is not successful on the desktop:
    http://www.youtube.com/watch?v=iNnGMBMJKNM

    July 9 will be an important date for Microsoft. Microsoft and ZDNet have been trying to bury the damage TDL-4 and its relatives have done. If it's large enough of an issue, than present media outlets that Microsoft controls won't be enough to contain the damage.
    Joe.Smetona
  • @Jack,

    The rubberised cover/keyboard looks far the most interesting piece of this. I wonder if anybody will actually be able to touch-type on them?

    Your "OEMs....have nowhere else to go" is not substantiated with anything resembling a fact. The Google/Motorla hook up "makes it look even less partner-friendly than Microsoft", does it? So why is Samsung the market leading smartphone manufacturer? (Clue: it isn't their Windows Phones that are doing it for them...)
    BrownieBoy-4ea41